State Senate President Joe Scarnati ... ... this morning unveiled a proposed impact fee on Marcellus shale natural gas drillers that's projected to raise $45 million in its first year, rising to $172 million by 2015.

In a conference call with reporters, the Jefferson County Republican called the proposed fee "my best attempt to work within the parameters that have been handed to me." He also said he does not believe that lawmakers will be able to pass the Corbett administration's $27.3 billion budget without implementing a fee.

While the cash raised from the fee would be only a drop in the bucket toward closing a projected $4 billion deficit (and isn't going to go there, in any event), Scarnati said lawmakers cannot escape the political reality that voters believe drillers are getting a pass while other parts of the state bear the brunt of the administration's proposed spending cuts.

"I cannot see how we get the budget process done, with all the cuts occurring in so many lines, without addressing an impact fee from this industry," he said.

Gov. Tom Corbett has said he's willing to consider a locally levied fee to help counties and municipalities deal with the public cost of drilling as long as the fee doesn't look like a tax and none of the money raised from it goes into the state's general fund budget.

Speaking with reporters this morning, Scarnati said he'd gotten a "caution light" from the Republican governor on the proposal. But he believes he's hit the marks set by the administration.

Scarnati's proposal calls for splitting the proceeds from the tax three ways between counties and municipalities that have drilling taking place within their borders. Municipalities without wells, but within counties where drilling is taking place, would also be cut in.

The fee would be administered by the Pennsylvania Public Utility Commission and the money raised from it would go to a host of efforts, including infrastructure repair; road and bridge repairs; improvements to local water and sewer systems; the preservation or improvement of local water supplies and "other reasonable purposes related to the health, safety and welfare related to severing natural gas," he said.

Those efforts could include funding for local hospitals or emergency management efforts, Scarnati said. The distribution was deliberately kept wide because "we want to make sure we don’t limit ourselves. Today, we see the impacts, Tomorrow, it can change."

Scarnati's proposal, which is expected to be introduced in bill form next week, with a vote by the full Senate possibly coming later this spring, would impose a base fee of $10,000 and then add assessments based on the production from the well and the price of gas.

Asked why he believed his proposal was a fee and not a tax, Scarnati stressed that none of the revenue raised from the levy would go directly to the state's general fund. He added that there are "no exemptions for capital recovery, not offsetting credits.

"This is a straight fee. This a straight fee going to PUC with a distribution formula. As we compare taxes that go to general fund and their absolutely any use, This has very specific uses."

Scarnati urged backers of a severance tax on drillers to drop their proposals, saying his plan hits the concerns addressed by environmentalists.

"Those who continue to say want a try statewide severance tax are forgetting the reality that we have a governor who has said he will veto a tax," he said. "I don’t think there is any merit in either legislative body to push for severance tax and to delay this for another year."

Corbett has said that he wants to wait for his new Marcellus Shale Commission to finish its work before he considers a fee. The panel is deliberating on impact fees and its report is expected in July.

Scarnati said this morning that there's no reason that lawmakers and the commission can't work parallel to each other.

"We're all trying to be respectful of the commission," he said. "To me, we’ve got some core issues out there that still need to be address. The appetite is strong to get as much done as we can before we leave in June."

Matt Pitzarella, a spokesman for driller Range Resources, said the company welcomes Scarnati's proposal and agrees with it in concept. But company officials have yet to review the fine print.

"The most important part is where the revenue goes and coupled with strong, but consistent, local regulations," said Pitzarella, who called Scarnati's proposal "a big step in the right direction."

Below, you'll find summaries of how the tax will be enacted, along with a summary of revenue projections:

Current Comments

All these sites should be treated like mines and have to have bonding done to cover reclamation of the site, water damage, and any infrastructure damage. The bonds at any local mines cover these things and would not be considered a tax, it's an insurance policy that the drilling companies take out saying they will repair all damages.

Posted By: John | Apr 28, 2011 1:44:03 PM

Scarnati is levying a taaa, whoops, a fee on the gas industry. The taaaa, whoops , will be used to fund bridge repair, road repair, very similar to taxes now in place in PA. It will not be a tax, because he say's its a fee. Now Scarnati will be able to sleep at night by being able to keep the no tax deal he sold to the gas industry for the briiii, whoops, campaign contributions they stuffed into his pockets. See you at the next Super Bowl, Scar.
A tax may be a fee, but a Harrisburglar will always be a Harrisburglar.

Posted By: bilmac | Apr 28, 2011 1:38:31 PM

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